In accounting, debits and credits are the fundamental building blocks of the double-entry bookkeeping system. Every financial transaction affects at least two accounts, with one account being debited and another credited.
Understanding the normal balance of each account type is key:
| Account Type | Normal Balance | To Increase | To Decrease |
|---|---|---|---|
| Assets | Debit | Debit | Credit |
| Liabilities | Credit | Credit | Debit |
| Equity (Capital) | Credit | Credit | Debit |
| Revenues | Credit | Credit | Debit |
| Expenses | Debit | Debit | Credit |
| Dividends | Debit | Debit | Credit |
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